But that’s not all that’s going up. Someone has to pay for this raise. How will increasing social security benefits help beneficiaries? And who pays it?
Good and bad benefits in 2022
In 2022, with inflation of 8.2%, the COLA social security benefit was 5.9%. Although it seemed low at the time, it was the biggest increase from COLA of 4.1% in 2005.
But 5.9 percent didn’t look that good when the Medicare hike was factored into the equation. The Medicare premium increased by 14.5 percent. This was the largest increase in its history.
What are the actual numbers and how have they impacted Americans’ benefits?
For example, your Medicare premium was $ 148.50 in 2021; then it jumped to $ 170.10 this year.
Meanwhile, if you were receiving Social Security benefits of $ 2,000 per month, that 5.9 percent COLA would give you an additional $ 118 per month, a monthly total of $ 2,118. Taking into account the increase in Medicare, you would have received an additional $ 52.10 per month.
Now, take inflation into account – that eliminated an additional $ 4.27 of the increase. So actually, for that $ 2,000 monthly benefit, you got a $ 47.83 raise.
These are general numbers, but you probably get it.
The 2023 increase of 8.7% should be better. It is the highest since the rise in COLA in 1980. That year it was 14.3% and inflation was 14%.
2023 highest COLA since 1980
The COLA for Social Security began in 1975. It is based on the fluctuations in inflation according to the Consumer Price Index for Urban Wage and Office Workers (CPI-W). The Social Security Administration takes the third quarter inflation rate each month and compares it to the same period last year.
For example, in July 2022, CPI was 8.5% and 8.3% in August. It fell to 8.2 percent in September. COLA of 8.7% for 2023 was based on these figures.
COLA helps protect retirees from truly living on a fixed income as they receive some increases in their income.
This 8.7% increase equates to $ 146 for a single retiree receiving $ 1,827 in monthly benefits. A married couple receiving $ 2,972 per month will have an increase of $ 238.
The increase will appear in your January 2023 check.
Some Medicare premiums drop slightly
The Medicare Part B premium also increased in 2022. The explanation was to pay for an expensive Alzheimer’s drug, Aduhelm, which was new to the market. But there have been changes in the use and price of the drug. Other services and items in Part B also turned out to be lower than expected. According to the Centers for Medicare and Medicaid Services (CMS), this resulted in large reservations in the Part B account.
As a result, the Medicare Part B premium will decrease by $ 5.20 per month.
But those beneficiaries who pay based on their modified adjusted gross income will continue to pay the higher premiums. Depending on how much a recipient extends an adjusted gross income greater than $ 97,000 ($ 194,000 for spouses), the Part B premium will range from $ 230.80 to $ 560.50.
The CMS estimates that around 7% of Medicare beneficiaries pay this amount.
Increase in the social security ceiling
Working Americans pay 6.20 percent for the Social Security payroll tax. They pay and an additional 1.45 percent for Medicare. Their employers match the combined rate with an additional 7.65%. Self-employed workers are required to pay 15.30 percent.
Those taxpayers who earn more than $ 200,000 (married couples filing jointly who earn $ 250,000) pay an additional 0.9 percent of their Medicare taxes.
Higher-income taxpayers will also have to contend with additional social security taxes in 2023. This is because the maximum amount of earnings subject to social security taxes will increase. The maximum amount of earnings is known as the salary base.
The wage base will increase by 9 percent. As a result, the 2022 salary base of $ 147,000 will rise to $ 160,200. This adjustment raises taxes for about 6 percent of workers. It is not based on the CPI but rather on the national average wage index. This is calculated by the Social Security Administration.
In 2018, the salary base was $ 128,400. The jump to $ 160,200 reflects a 25% increase.
There is no limit to Medicare.
Does the cost of living adjustment help?
It all depends on which ox is gored. If you’re a Social Security retiree, COLA will help spread this year’s inflation blow and last year’s Medicare hike. And even though Medicare will only be about $ 5 less, it’s better than a raise.
But if you are in a high income bracket, be prepared. Your salary will be a little smaller next year.
The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are intended for general information purposes only and should not be construed or construed as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial, property or other advice. The Epoch Times assumes no responsibility for the accuracy or timeliness of the information provided.